AEO is considered as an important tool for facilitation of the customs and trade processes for Customs and for traders, the contribution of trade facilitation to the establishment of open markets and to the creation of long-standing opportunities for investment and, consequently, economic growth and mutual recognition agreements (MRAs) MRA "open the doors" to and for other countries.

1. https://dailyasianage.com/news/132875/mutual-recognition-of-authorized--economic-operator
EDEN BUILDING TO STOCK EXCHANGE
Published: 29 July 2018
Mutual recognition of Authorized Economic Operator
M S Siddiqui
Trade facilitation is a key policy for customs, and at the heart of the World Trade Organization (WTO)
Doha Round of negotiations.
Customs administrations continue to enhance security and facilitation of the global supply chain by
implementing WCO international standards.
A core element of these developments is AEO programs that are based on the SAFE Framework's Pillar
II and the Revised Kyoto Convention's authorized persons provisions. Establishing AEO programs and
concluding AEO MRAs continue to be a priority for WCO Members.
AEO are recognized traders and other port users who meet criteria specified by the law of any country
are entitled to participate in simplified and rapid release procedures on the provision of minimum
information and physical verifications.
The criteria include having an appropriate record of compliance with Customs requirements and have
truck records of commitment to supply chain security by being a participant in a Customs-Business
partnership program, and a satisfactory system for managing their commercial records (WCO 2005).
The objective is the securing of the entire supply chain from the manufacturer of goods to the end
consumer, with only AEO certified entities having access to shipments.
Companies with AEOcertificate are regarded by customs authorities as being particularly reliable and
trustworthy. They therefore enjoy particular privileges with regard to security-related customs controls and
can claim simplification in customs clearance.
Mutual recognition arrangements of AEO of different countries to acceptance of AEO of one accepted by
other countries. This program is under the World Customs Organization's Framework of Standards to
secure and Facilitate Global Trade (SAFE) Framework of Standards to Secure and Facilitate Global
Trade.

2. Mutual recognition is in a broad concept whereby an action or decision taken by one administration is
recognised and accepted by another customs administration.
It uses toprovide a solid platform for development of international systems of mutual recognition of AEO
status at bilateral, sub-regional, regional and, in the future, global levels.
These systems will involve a WCO Member Customs administration recognizing the AEO authorization
system in another WCO Member with an operational AEO program as being equivalent to its own.
The mutual recognition of AEOs is a land mark step of standardisation of AEO. It facilitate the cooperation
to develop mechanisms for mutual recognition of AEO validations and authorisations and Customs
controls results and other mechanisms that may be needed to eliminate or reduce redundant or
duplicated validation and authorisation efforts.
Features of mutual recognition arrangements/agreements Recognition of authorisation and audit process
One of the main features of arrangements/agreements on mutual recognition is that 'mutual recognition' is
based on the trust between the parties in agreeing to mutually recognise AEO and/or security measures.
Generally, mutual recognition of AEO is perceived as an arrangement or agreement between two or more
customs administrations (or governments) that recognise each other's audits, controls and authorisations
as equivalent and therefore provide reciprocal benefits to AEOs.
SAFE also describes the challenges of mutual recognition and points, in particular, to the challenges
linked to negotiating mutual recognition of controls as this makes the routine sharing of information and
control results necessary.
In practice, this means that AEOs authorised by the partner country are recognised as being as secure
and reliable as AEOs authorised by their own administration and will, therefore, receive benefits such as
a reduced risk score and reduced controls when importing into the customs territory.
In general terms, only administrations/governments that have confidence in the control mechanisms of
another administration will enter into negotiations on mutual recognition.
Mutual Recognition as a concept is reflected in the WCO's Framework of Standards to Secure and
Facilitate Global Trade (SAFE Framework), a strategy designed with the support of the many countries
and being implemented by Customs administrations around the world.
The SAFE Framework calls for Customs administrations to develop industry partnership programs, which
the Framework refers to as Authorized Economic Operator (AEO) programs.
An AEO is defined by the Framework as "… a party involved in the international movement of goods in
whatever function that has been approved by or on behalf of a national Customs administration as
complying with WCO or equivalent supply chain security standards".

3. On the other hand this Framework is structured with two supporting pillars: Customs-to-Customs and
Customs-to-Business. The concept of Mutual Recognition is reflected in the Customs-to Customs pillar.
It is the ability of Customs Administrations to work together to improve their capability to detect high-risk
consignments and expedite the movement of legitimate cargo.
This cooperation between Customs Administrations assists the Customs-to-Business pillar by providing
standardized security requirements of their AEO programs.
The United Nations Conference on Trade and Development (UNCTAD) highlights the importance of
achieving mutual recognition from the perspective of developing economies.
The mutual recognition of AEO status will be critical to ensure that operators who comply with the criteria
set out in the SAFE Framework and have obtained AEO status in their own country are in fact able to
enjoy the benefits outlined in the SAFE Framework and may participate in international trade on equal
terms.
The traders in developing countries are unable to enjoy the AEO status and mutual recognition by other
countries due to lack of regulatory frame work and related service facilities and may find themselves at a
serious competitive disadvantage (UNCTAD 2008).
So far, a total of 69 AEO programs have been established across 79 countries and there are 16 programs
in the development stage. As of May 2016, in total 40 bilateral MRAs had been concluded with an
additional 30 in the negotiation process.
The implementation of such a program, much like any other trade compliance review or remediation plan,
inevitably has a cost for assessing the status quo, determining the remediation, implementation,
monitoring, and the training of responsible individuals.
There are also technology costs associated with becoming an AEO in the forms of databases and
connectivity to the relevant Customs authorities.Striking the balance between promoting trade facilitation
and ensuring a high level of safety and security amongst economic operators is no small task.
Considering some of the challenges for the small-medium sized enterprise (SME) to have access to AEO
given the costs of preparing and applying for AEO, as well as the future maintenance costs.
While the AEO guidance does indicate that many of the criteria and conditions necessary for any of the
authorisations are adjusted for SMEs, it may still be difficult for an SME to build and justify a business
case for AEO.
In the same sense, an SME could allocate time and resources to improving their own internal controls in
order to decrease their risk assessment score, which would not grant them access to the simplifications,

4. but would decrease the chances of physical inspections and supply chain disruptions at the customs
point.
The AEO concept should ensure a safer and more secure end-to-end supply chain. Being recognized as
an AEO will constitute an added value for the operator, as it demonstrates compliance with solid security
criteria and controls.
Through mutual recognition, AEO's should be expected to benefit from: Improved economic efficiency
through reduced time and costs associated with Cross-border Customs controls due to priority treatment;
Improved predictability and precision in moving goods from one's own territory to the territory of the
trading partner whilst improving competitiveness of business; Reduced cargo theft and pilferage by
improving the security of the bilateral supply chain; Reciprocal or comparable compliance benefits
whenever equivalent programs are provided.
The term 'AEO' is used to refer to Authorized Economic Operators and it used by partner countries in
another way as USA name it C-TPAT.
AEO is considered as an important tool for facilitation of the customs and trade processes for Customs
and for traders, the contribution of trade facilitation to the establishment of open markets and to the
creation of long-standing opportunities for investment and, consequently, economic growth and mutual
recognition agreements (MRAs)MRA "open the doors" to and for other countries.
Mutual recognition is one of the major benefits for businesses applying for AEO status. Every country that
has launched or is about to launch an AEO program aspires to conclude MRAs with its major trading
partners.
The SAFE Framework defines mutual recognition as an "action or decision taken or an authorization that
has been properly granted by one Customs administration is recognized and accepted by another
Customs administration."
The SAFE Framework also states that "mutual recognition can be a means to avoid duplication of security
controls and can greatly contribute to the facilitation and control of goods moving in the international
supply chain" (SAFE 2012; p 34. As of March 2014, 23 MRAs have been concluded and 10 AEO MRA
negotiations are currently ongoing.
The first mutual recognition agreement was completed between the United States and New Zealand in
June 2007. A similar agreement has been concluded between the EU and Japan. Also, China is in
discussions with the EU about mutual recognition as well. The EU and the USA have a mutual recognition
between their respective AEO programs in June 2012.
The Guidelines for developing a mutual recognition arrangement/agreement from the WCO 20 describes
with details which is the process to achieve mutual recognition between customs administrations: "1.
Establishment of high-level commitment to consider an MRA at the appropriate level 2. Assessment of
alignment of AEO Programs with the WCO SAFE Framework.

5. 3. Consideration and identification of comparable benefits and the conditions under which AEOs certified
by one administration will be given access to them in the Customs territory of the other party.
4. Completion of a gap analysis based on an in depth side-by-side comparison between AEO Programs
focusing on legislation, procedures, standards and guidelines to determine compatibility or differences. 5.
Undertaking of relevant action to close any unsustainable gaps between AEO Programs.
6. On-site joint validation audits to assess the practical implementation of AEO Programs. 7. Visits to
Customs' AEO Headquarters' offices to observe program oversight, if required. 8. Exchange of best
practices and training materials to enhance AEO Programs, if required. 9. Resolution of data protection
and data security issues.
10. Establishment of data exchange procedures, including required IT systems. 11. Establishment of a
legal framework for the MRA, if not already in place. 12. Consideration of a pilot phase to test proof of
concept if required. 13.
Development of procedures to oversee the governance, operation andmaintenance of an MRA. 14.
Designating and providing the point of contact to the partner country.
15. Implementation of review cycles to assess the impact of MRA against agreed objectives. Customs
administrations should consult AEOs impacted by the MRA, prior to the review process, to ensure that
their input is reflected.
The writer is a legal economist.
Email: mssiddiqui2035@gmail.com